Iran Starts Enrichment at Fordo underground Site Iran has begun uranium enrichment at a new underground site well protected from possible airstrikes, a leading hardline newspaper reported Sunday in another show of defiance against Western pressure to intervene in Tehran’s nuclear program.

The latest statements are certain to fuel tensions with the United Nation, the U.S. and its allies, which are trying to increase pressure on Iran with new sanctions to halt its disputed nuclear program. The West suspects Iran is trying to make nuclear weapons, but Iran denies this and says that its nuclear program is only for energy and medical research, and refuses to halt uranium enrichment.

Another leading national newspaper reported that Tehran has begun injecting uranium gas into sophisticated centrifuges at the Fordo facility near the holy city of Qom, the religious center of the country.

Built next to a military complex, Fordo was long kept secret and was only acknowledged by Iran after it was identified by Western intelligence agencies in September 2009. Buried under 90 meters of rock, the facility is a hardened tunnel and is protected by air defense missile batteries and the Revolutionary Guard, Iran’s most powerful military force. The site is located about 32 kilometres north of Qom.

(Reuters) - U.N. nuclear inspectors arrived in Iran on Sunday, hoping to shed light on suspected military aspects of Tehran's atomic work, on the day its lawmakers look set to ban oil exports to Europe in revenge for new EU sanctions.

The head of the International Atomic Energy Agency delegation said he aimed to "resolve all the outstanding issues with Iran" over the nuclear program which the West believes is aimed at making weapons but which Iran insists is peaceful.

"In particular we hope that Iran will engage with us on our concerns regarding the possible military dimensions of Iran's nuclear program," IAEA Deputy Director General Herman Nackaerts told reporters before departing from Vienna airport.

That may be a tall order, with Iran insisting its right to peaceful nuclear technology be recognized by skeptical countries which say its uranium enrichment activities - some of which have been moved to a bomb-proof bunker - go beyond what is needed for atomic energy.

Tensions with the West rose this month when Washington and the European Union imposed the toughest sanctions yet in their campaign to force Tehran into making concessions. The measures take direct aim at the ability of OPEC's second biggest oil exporter to sell its crude.

Less than one week after the EU's 27 member states agreed to stop importing crude from Iran from July 1, Iranian lawmakers were due to debate a bill later on Sunday that would cut off oil supplies to the EU in a matter of days.

By turning the sanctions back on the EU, lawmakers hope to deny the bloc a six-month window it had planned to give those of its members most dependent on Iranian oil - including some of the most economically fragile in southern Europe - to adapt.

BUYBACK PROBLEMS

The head of the state-run National Iranian Oil Company (NIOC) said late on Saturday that the export embargo would hit European refiners, such as Italy's Eni, that are owed oil from Iran as part of long-standing buy-back contracts under which they take payment for past oilfield projects in crude.

"The decision must be made at high echelons of power and we at the NIOC will act as the executioner of the policies of the government," Ahmad Qalebani told the ISNA news agency.

"The European companies will have to abide by the provisions of the buyback contracts," he said. "If they act otherwise, they will be the parties to incur the relevant losses and will subject the repatriation of their capital to problems."

"Generally, the parties to incur damage from the EU's recent decision will be European companies with pending contracts with Iran."

Italy's Eni is owed $1.4-1.5 billion in oil for contracts it executed in Iran in 2000 and 2001 and has been assured by EU policymakers its buyback contracts will not be part of the European embargo, but the prospect of Iran acting first may put that into doubt.

Eni declined to comment on Saturday.

The EU accounted for 25 percent of Iranian crude oil sales in the third quarter of 2011. However, analysts say the global oil market will not be overly disrupted if parliament votes for the bill that would turn off the oil tap for Europe.

"The Saudis have made it clear that they'll step in to fill the void," said Robert Smith, a consultant at Facts Global Energy.

"It would not pose any serious threat to oil market stability. Meanwhile Asians, predominantly the Chinese and Indians, stand to benefit from more Iranian crude flowing east and at potential discounts."

Potentially more disruptive to the world oil market and global security is the risk of Iran's standoff with the West escalating into military conflict.

Iran has repeatedly said it could close the vital Strait of Hormuz shipping lane if Western sanctions succeed in preventing it from exporting crude, a move Washington has said it would not tolerate.

The IAEA's three-day visit may be an opportunity to defuse some of the tension. Director General Yukiya Amano has called on Iran to show a "constructive spirit" and Tehran has said it is willing to discuss "any issues" of interest to the U.N. agency, including the military-linked concerns.

But Western diplomats, who have often accused Iran of using such offers of dialogue as a stalling tactic while it presses ahead with its nuclear program, say they doubt Tehran will show the kind of concrete cooperation the IAEA wants.

They say Iran may offer limited concessions and transparency in an attempt to ease intensifying international pressure, but that this is unlikely to amount to the full cooperation required.

The outcome could determine whether Iran will face further international isolation, or whether there are prospects for resuming wider talks between Tehran and the major powers on the nuclear dispute.

Herman Nackaerts of the International Atomic Energy Agency, IAEA, the chief agency official in charge of the Iran file, prepares for his flight to Iran at Vienna's Schwechat airport, Austria, on Saturday, Jan. 28, 2012. The U.N. nuclear agency is including two senior weapons experts on its mission to Tehran on Saturday, saying that any progress on the issue of alleged clandestine nuclear weapons work by Iran would be significant. (AP Photo/Ronald Zak)

EHRAN—Iran's foreign minister expressed optimism Sunday that a visit by U.N. inspectors to Iran's nuclear facilities would produce an understanding, despite world concerns that Iran is trying to build nuclear weapons.

The three-day inspection tour by the International Atomic Energy Agency team comes during rising tension. The West is imposing new sanctions to try to force Iran to slow or halt its nuclear program, and Iran is threatening to close the Strait of Hormuz, a vital oil passage, in retaliation.

Visiting Ethiopia, Iranian Foreign Minister Ali Akbar Salehi appeared to be trying to defuse the crisis.

"We are very optimistic about the mission and the outcome" of the IAEA mission, Mr. Salehi was quoted as saying by Iran's semiofficial Mehr news agency.

"We've always tried to put transparency as a principle in our cooperation with IAEA," Mr. Salehi said. "During this visit, the delegation has questions and the necessary answers will be given,"

The findings from the visit could greatly influence the direction and urgency of U.S.-led efforts to rein in Iran's ability to enrich uranium—which Washington and allies fear could eventually produce weapons-grade material. Iran has declined to abandon its enrichment labs, but claims it seeks to fuel reactors only for energy and medical research.

An Iranian toy company is sending a pink replica of a U.S. spy plane captured in December to U.S. President Barack Obama. (Video: Reuters/Photo: Getty Images)

The team is likely to visit an underground enrichment site near the holy city of Qom, 80 miles south of Tehran, which is carved into a mountain as protection from possible airstrikes. Earlier this month, Iran said it had begun enrichment work at the site, which is far smaller than the country's main uranium labs but is reported to have more advanced equipment.

The U.N. nuclear agency delegation includes two senior weapons experts—Jacques Baute of France and Neville Whiting of South Africa—suggesting that Iran may be prepared to address some issues related to the allegations that it seeks nuclear warheads.

In unusually blunt comments ahead of his arrival, the IAEA's Deputy Director General Herman Nackaerts, who is in charge of the agency's Iran file, said he wants Tehran to "engage us on all concerns."

Iran has refused to discuss the alleged weapons experiments for three years, saying they are based on "fabricated documents" provided by a "few arrogant countries," a phrase authorities in Iran often use to refer to the U.S. and its allies.

"So we're looking forward to the start of a dialogue," Mr. Nackaerts told reporters at Vienna airport. "A dialogue that is overdue since very long."

Iranian state media allege that Mr. Roshan, a chemistry expert and director of the Natanz uranium enrichment facility in central Iran, was interviewed by IAEA inspectors before being killed earlier this month in a bomb attack that Iran claims is part of an Israeli-led covert campaign of sabotage and slayings. Mr. Roshan was at least the fourth member of Iran's scientific community to be assassinated.

In Vienna, the IAEA said it didn't know Mr. Roshan and never talked to him.

The IAEA team wants to talk to key Iranian scientists suspected of working on a weapons program. They also plan to inspect documents related to nuclear work and secure commitments from Iranian authorities to allow future visits.

It is unclear how much assistance Iran will provide, but even a decision to enter a discussion over the allegations would be a major departure from Iran's frequent simple refusal to talk about them.

Iran also has accused the IAEA in the past of security leaks that expose its scientists and their families to the threat of assassination by the U.S. and Israel.

The visit was set to coincide with a vote in Iran's parliament on a bill that would require the government to immediately cut the flow of crude oil to Europe in retaliation for sanctions. Lawmakers postponed the vote Sunday to further study the bill, and no date for a vote has been set.

The draft bill is Iran's response to an EU decision last week to impose an embargo on Iranian oil. The measure is set to take full effect in July.

The head of Iran's state oil company said Sunday that pressures on Iran's oil exports—the second biggest in OPEC—could drive prices as high as $150 a barrel.

"It seems we will witness prices from $120 to $150 in the future," Ahmad Qalehbani was quoted by the official Islamic Republic News Agency. He didn't give a timeframe for the prediction, nor any other details.

The price of benchmark U.S. crude on Friday was around $99.56 a barrel. About 80% of Iran's foreign revenue comes from exporting around 2.2 million barrels of oil a day.

Oil prices have been driven higher in recent weeks by Iran's warnings that it could block the Strait of Hormuz at the mouth of the Gulf, the route for about one-fifth of the world's oil. Last week, the American aircraft carrier USS Abraham Lincoln, joined by French and British warships, entered the Gulf in a show of strength against any attempts to disrupt oil tanker traffic.